Modelling the impact of energy consumption and environmental sanity in Turkey: A STIRPAT framework

This study examines the causal relationship between energy consumption and the economic growth of Turkey. The analysis was conducted within the Stochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) framework. This is a salient improvement from the previous studies because this unique method permits synergetic modelling of energy dynamics vis-à-vis its environmental impact. The study applied the structural break unit root test, bound testing cointegration and vector error correction causality analysis. The study found that the importation of energy is the major challenge to the Turkish conservative policy. When controlling for C02 emissions in the energy import model, the study found that an approximate 0.14% increase emission emanates from imported energy for Turkey in the short-run. Similarly, 1.1% of emissions results from electricity production and other related activities over the short-run. Even though, evidence of long-run relations was only presence in the C02 emission as well as the financial development models, the correcting process from the short-run deviation to the long-run equilibrium is higher in the electricity consumption model, in that 51% short-run disequilibrium is corrected toward the long-run equilibrium per year compared with 3.3% and 4.8% in the energy import and C02 emission models, respectively. One positive aspect observed is the robustness of Turkey's financial institution to support the energy sector. However, financial institutional support for conservational policy is pathetically weak due to the low potential return.